Myth #9 : IPO Style Allotment is a very apt strategy for marketing real estate

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(Category: Marketing)

Also published in CNBCTV18




Can real estate be marketed as an IPO? Broadly speaking, it is inappropriate. However, there are extremely special circumstances when this can be tried.

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Proponents of IPO Style Marketing believe that this strategy creates an artificial scarcity resulting in the urgency of decision making for the consumers. They believe that when the customer sees the likelihood of being left out, he decides faster. 


Technically speaking, IPO style allotment is inappropriate for real estate.  In Initial Public Offering for securities, all securities on sale are identical and have similar valuations and offer identical benefits to all purchasers. However, all homes in any given project do not offer the same value to all customers. Certain home buyers will never buy a south-facing home – even at steep discounts.  While others may see a premium value in it.  In the case of securities, allottees are indifferent to the distinctive number of the security certificate they receive. In the case of a home, they aren’t. The emotional element in home buying creates an imperfection in the home market.  Investment in securities is relatively perfect markets where the only takeaway is profits made by investors.

IPO style marketing, therefore, can possibly work when potential home buyers largely comprise of investors that are looking purely at monetary gains and are not looking for any emotional attachment to the home purchase. And secondly, when perceived demand for homes on sale is much larger than the supply. It is only in such a situation that one will see many ‘left outs’ in the allotment process. And it is the existence of a larger number of left-outs that creates value for applicants in an IPO.  If everyone is to get an allotment, investors will see no value in IPO style allotment. If these conditions are not met, it is not worth venturing with this strategy.

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